Product Lifecycle Analysis

PowerPoint Diagram Pack Product Lifecycle Analysis Product Lifecycle Analysis is an invaluable tool for developing a robust product marketing strategy. This document details a 5-phase approach to proper Product Lifecycle Analysis and draws out key strategic insights at each stage of the lifecycle. Additional concepts discussed include Consumer Adoption Curve, Bass Diffusion Model, Lifecycle-Performance Factor Matrix, Strategic Positioning, and Substitution Analysis. ,[object Object],[object Object],[object Object],Innovators (2.5%) Early Adopters (13.5%) Early Majority (34%) Late Majority (34%) Laggards (16%) STAGE 1 INTRO STAGE 2 GROWTH STAGE 3 MATURITY STAGE 4 DECLINE Time / Adoption Saturation / Sales Compactor Dishwasher Color TV Room A/C Automatic Washers Freezers Refrigerators Ranges & Ovens B&W TV Wringer

Contents ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Product Lifecycle Analysis is a useful tool for forecasting product sales and developing a product’s marketing strategy ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],PRODUCT LIFECYCLE ,[object Object],[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ INTRO GROWTH MATURITY DECLINE

Here is an example mapping various household durables in the early 1970s to their positions on the lifecycle curve ,[object Object],Innovators (2.5%) Early Adopters (13.5%) Early Majority (34%) Late Majority (34%) Laggards (16%) Time / Adoption Saturation / Sales Compactor Dishwasher Color TV Room A/C Automatic Washers Freezers Refrigerators Ranges & Ovens B&W TV Wringer THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ STAGE 1 INTRODUCTION STAGE 2 GROWTH STAGE 3 MATURITY STAGE 4 DECLINE

The appropriate strategy for a business unit depends on the stage of lifecycle for the related industry ,[object Object],INTRODUCTION Typified by slow growth rate ,[object Object],[object Object],DETAILED CHARACTERTIZATION GROWTH Signaled by a significant increase in sales growth and profitability ,[object Object],[object Object],PRIMARY CHARACTERIZATION STAGE MATURITY Defined by the reduction in the rate of sales growth and a further reduction in unit costs ,[object Object],[object Object],[object Object],DECLINE See a continuation of decline in unit sales, cash flows and profitability ,[object Object],[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Product Lifecycle Analysis can be used for multiple purposes ,[object Object],Product Lifecycle Analysis provides a framework for forecasting industry or product sales. ,[object Object],[object Object],Lifecycle Analysis can be used to hypothesize competitors’ strategic moves. ,[object Object],[object Object],Lifecycle Analysis can be used the initial step in determining appropriate product pricing. ,[object Object],[object Object],[object Object],STRATEGIC PURPOSE DETAILS THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

With all the strategic benefits of Product Lifecycle Analysis, it is important to note this framework’s drawbacks ,[object Object],Lifecycle Analysis is based entirely on time. ,[object Object],[object Object],[object Object],[object Object],The actual timing of the lifecycle stages different from industry-to-industry and product-to-product. ,[object Object],[object Object],[object Object],From a strategic perspective, there is no clear relation between the nature of competition in an industry and its current lifecycle stage. ,[object Object],[object Object],DRAWBACK DETAILS Lifecycle Analysis should be used as a starting point to developing strategic hypotheses—underlying economics should be further analyzed before specific action is recommended. THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

On a high level, Product Lifecycle Analysis involves 3 areas of analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Forecast how sales will develop. Predict the timing of future developments. Establish if the lifecycle concept is applicable. Product Lifecycle Analysis THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

Phase 1 Define the industry/scope of analysis Industry scope must be defined to identify the appropriate lifecycle stage. ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Define the industry/ scope of analysis Determine the level of lifecycle perf. metrics Identify the lifecycle stage Forecast sales based on lifecycle stage Develop strategic hypotheses and action steps 1 2 3 4 5

This is a typical Lifecycle-Performance Factor Matrix ,[object Object],The matrix above is true to most industry and product lifecycles, but many exceptions exist. EXTERNAL PERFORMANCE FACTOR LIFECYCLE STAGE Source: Hax and Majluf, 1984 THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Low Stable Stable High Technology Innovation High High Increasing Low Barriers to Entry Stable, customers loyal Stable, strong loyalty Stabilizing Unstable Distribution/Stability of Market Share Decreasing Several, consolidation occurring Increasing Few Number of Competitors Decreasing Wide, private label emerging Increasing Narrow Breadth of Product Lines Weak Moderate Strong Uncertain Market Industry Potential Negative, increasing Positive, decreasing Positive, increasing Positive, increasing Relative Growth Rate DECLINE MATURITY GROWTH INTRODUCTION Define the industry/ scope of analysis Determine the level of lifecycle perf. metrics Identify the lifecycle stage Forecast sales based on lifecycle stage Develop strategic hypotheses and action steps 1 2 3 4 5

In addition to validation, these generic performance metrics can provide strategic insight ,[object Object],PERFORMANCE FACTOR Source: Michael Porter, Competitive Strategy Use these metrics and trends to develop strategic insight into the market dynamics. THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Overall Strategy ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Margins and Profits ,[object Object],[object Object],[object Object],Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Competition ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Foreign Trade DECLINE MATURITY GROWTH INTRODUCTION Define the industry/ scope of analysis Determine the level of lifecycle perf. metrics Identify the lifecycle stage Forecast sales based on lifecycle stage Develop strategic hypotheses and action steps 1 2 3 4 5

Phase 4 Forecast sales based on lifecycle stage Sales volumes can be estimated using the lifecycle stage—this is done by adjusting the historical growth rate of sales based on the knowledge traditional sales patterns in the lifecycle. Source: Monroe, Pricing, 1990 0 Units, Sales Growth Rate Sales Sales Growth Rate Time THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Define the industry/ scope of analysis Determine the level of lifecycle perf. metrics Identify the lifecycle stage Forecast sales based on lifecycle stage Develop strategic hypotheses and action steps 1 2 3 4 5 STAGE 1 INTRODUCTION STAGE 2 GROWTH STAGE 3 MATURITY STAGE 4 DECLINE

Here is the Bass Model Diffusion Equation ,[object Object],The Bass Model approximate the S-curve using the following adoption equation: Where: P t probability of a purchase at time t, given that no purchase has yet been made p coefficient of innovation, initial probability of adoption (from comparable products) q coefficient of imitation, measure of the “word of mouth” effect (from comparable products) y t-1 cumulative sales prior to period t (i.e. including period t-1) m market potential / potential sales volume (determined from market research) (y t-1 /m) fraction of the Total Available Market (TAM) who have tried the new technology ,[object Object],[object Object],THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Define the industry/ scope of analysis Determine the level of lifecycle perf. metrics Identify the lifecycle stage Forecast sales based on lifecycle stage Develop strategic hypotheses and action steps 1 2 3 4 5

To use the Bass Model, historical sales growth patterns of comparable products must be identified ,[object Object],[object Object],[object Object],[object Object],[object Object],For example, sales data for color TVs or DVD players could be used to estimate the market potential and penetration rates hi-definition TVs Source: Urban and Hauser, 1993 PRODUCT INNOVATION SAMPLE GROWTH RATE PARAMETERS THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ 0.36 0.017 Clothing dryers 0.36 0.007 Motels 0.38 0.009 Boat trailers 0.42 0.010 Air conditioners 0.54 0.018 McDonalds 0.65 0.025 Record players 0.84 0.005 Color TV 1.01 0.039 Hybrid corn q p 0.34 0.009 Power lawnmowers 0.17 0.018 Home freezers 0.22 0.003 Electric refrigerators 0.24 0.006 Electric blankets 0.25 0.028 Black and white TV 0.30 0.018 Water softeners 0.30 0.017 Automatic coffee makers 0.33 0.029 Steam irons Define the industry/ scope of analysis Determine the level of lifecycle perf. metrics Identify the lifecycle stage Forecast sales based on lifecycle stage Develop strategic hypotheses and action steps 1 2 3 4 5

In the Introduction stage, get your pricing strategy right ,[object Object],INTRO GROWTH MATURITY DECLINE THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Pricing should receive special attention in the Introduction stage  Monitor competitors and adjust positioning to preempt competitive moves  Experiment with production processes to ensure continuous improvement and innovation  Invest heavily in advertising, selling, sampling, promotion, and distribution to stimulate diffusion of the new product to earn new customers  Thus, the pricing decision must be made by weighing the benefits and risks of potential market demand (size and growth), competitive entry, and technological development  Although competitors will be less likely enter the market, a technological innovation may make the current product obsolete  If prices are set low, initial investment in the product may not be recovered  Competitors will enter the market, pushing prices down, unless the incumbent has a cost advantage (e.g. economy of scale, experience, investment required)  By setting prices high, margins will be maximized—minimizing consumer surplus with innovator/early adopter markets  There are two general pricing strategies in the Introduction stage: 1) set prices high to “skim the market,” or 2) set prices low to maximize “market penetration” – decision on strategy depends on level of competition 

The Maturity stage leads to 3 strategic options ,[object Object],INTRO GROWTH MATURITY DECLINE THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Based on the competitive dynamics in the industry, there are 3 strategies we should follow to extend the profitability and duration of the Maturity stage  ,[object Object],[object Object],[object Object],[object Object], ,[object Object],[object Object],[object Object], ,[object Object],[object Object],[object Object],[object Object],

We create a strategic positioning matrix by intersecting the lifecycle stage with the company’s competitive position ,[object Object],COMPETITIVE POSITION LIFECYCLE STAGE Source: Hax and Majluf, 1984 THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Abandon Turnaround or Phased withdrawal Turnaround or Abandon Up or Out Phased withdrawal or Abandon Find niche and hang on or withdrawal Find niche and protect it Selectively push for position Harvest or Phased withdrawal Find niche and attempt to protect it Maintain share Attempt to improve position Selective fight for market share Selectively attempt to improve position Selective fight for market share Hold position or Harvest Hold position Growth with industry Attempt to improve position Push for share Attempt to improve position Fight for market share Hold position Hold position Growth with industry Hold position Hold share Hold position Fight for market share DECLINE MATURITY GROWTH INTRODUCTION DOMINANT STRONG FAVORABLE TENABLE WEAK NONVIABLE

END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/

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Product Lifecycle Analysis

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